Non Qualified Annuity – Features and Benefits
The non qualified annuity is similar to a pension but in this case, you buy it as an individual, as compared to an employer. The non qualified annuity is not subject to the restrictions of qualified plans. This is very advantageous since this means that you can find plans that either have very small withdrawal penalties or even zero penalties, saving you money and offering you more flexibility. The non qualified annuity is also ideal for people who are at their advanced age since there are no age restrictions when it comes to these plans. You just have to check with your state since the rules are different depending on which state you reside in. also, these plans are not regulated by the IRS and so the contributions you make are not tax deductible, but your earnings are. Let us look deeper into that.
With the non qualified annuity, the taxes have already been paid on your principal investment. The deposits can come from certificates of deposit that have already matured, a brokerage account, savings or checking accounts, or even from an existing non qualified annuity. The only thing that is taxable here would be the earnings you get from the interest rates. If you decided to withdraw some of the earnings from a non qualified annuity, the taxes will not be due on that. You have numerous options on the interest that you have earned: you can withdraw it and use it for whatever things you want, or you can reinvest the money and it will be tax deferred for the future. With the non qualified annuity, if you decided to withdraw, you have to be at least 59 ½ before you can do so, even if technically, this is not a retirement account. If you withdraw before that age, the IRS will penalize you heavily. However, the government cannot force you to take your principal or the accrued interest at any age.
If the non qualified annuity has been surrendered, either partially or fully, the first amount would represent the earnings and all these earnings will be taxed with ordinary income tax rates. Once all the earnings have been distributed to the client, the remaining portion of the non qualified annuity will be considered tax free. If you decided to go for the annuity payout (the amount that is given in predetermined periods of time), a portion of this money is considered as a return of the principal and is exempted from gross income, and the other portion will be the earnings in which applicable taxes apply.
If you want an investment that will give you money without that much complications and stringent rules, then it is ideal to take advantage of the non qualified annuity. This is a very unique option that you can consider if you want to have security for your life especially during your old age. Let us help you find the best non qualified annuity for your needs. Select your state and receive rates/quotes from the top insurance companies in your area.